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tv   Mad Money  CNBC  May 4, 2012 6:00pm-7:00pm EDT

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brian? >> andy? >> the heat is coming in europe. >> rebecca? >> short euro yen. >> that's it for us. "mad money" with jim cramer starts now. with jim cramer sta right now. i'm jim cramer and welcome to my world. >> you need to get in the game! going out of business and he's nuts, they're nuts. they know nothing! there is a bull market somewhere. "mad money" you can't afford to miss it. >> i'm cramer, welcome to "mad money" people want to make friends, i'm trying to teach you how to make money. my job is not just to entertain but coach and educate me. call me. up day, down day, flat day, there is something you need to understand. investing is like comedy in disciplines, timing is everything. perhaps that similarity why some
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people call me a clown. and a joker, if not a midnight toker. they are complimenting me. when it comes to stocks getting the timing correct, knowing the right moment to buy and the right moment to sell is, let's say among the most important yet difficult and us from take itting parts of managing your money. that is why you hear commentators say it's impossible, impossible to time the market. in fact there is a whole cottage industry of naysayers telling you there is no way a regular investor can do it. you might as well give up on trying to trade, give up on picking your own stocks, put your money in an index fund, and leave it there for all eternity. i have nothing against index funds per se. they can be decent ways to make money in the market. you don't have the time or inclination to manage individual stocks. but the argument they are the
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only way to go is totally bogus. plus even with the index fund timing is crucial. if you bought it at the peak in october of 2007 when the s&p was trading 1500s, you got a gift. came in and bought it in march of 2009, s&p traded below 700 you made out like a bandit. how important is timing? the s and p at the top in 2007. ended up losing half your money in 18 months. you made a decent chunk back, that brutal loss can take ages to recover from. if you bought at the s&p at bottom, you doubled your money. if you bought the dow jones before europe ruled the roost on april 11th and panicked at the twilight of the summer of '11 you saw 20% of your capital erased. these are extreme examples but get the point across, timing is everything. unfortunately, actually time injuring buys and sales effectively in many ways may be the most difficult part of managing your money.
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because it's my mission in life to make you a better investor, i'll teach you how to timing with mistakes i've made and absorbing crucial lessons i made. you learn from my mistakes. let me make them and i've made them. let's get to one. one of the reasons timing the market is so tough is the moments of greatest opportunity when you should be buying stocks hand over fist, buy buy buy, the greatest moments of terror and angst when everyone is telling you to get out. >> sell sell sell. >> all your instincts are screaming you should panic, more important the most frightening moments the day you were freaking out when the market was being schmized, that is not the right thing to sell. the right move has been to buy virtually every time in my 30 plus years of investing. that is why i come out here every night and say nobody ever made a dime panicking, because
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it's an awful strategy, if you want to call eigit a strategy. if you don't like a market, it doesn't mean it's the right move to sell it. only once in my 30 year career was it right to blow out your stocks, trade in a sell program of epic proportions while others were panicking left and right. every other time selling was wrong, buying almost brilliant. whether it be the sell-off during the japanese nuclear crisis, 87 crash, i am that old. panic selling has not been the smart thing to do. it's been stupid. at these times of maximum fear was prudent buying and it worked big. the only time actually the panic made sense was to sell in the morasse of 2008. the financial system was on the brink of collapse. that was a systemic crisis. panic made plenty of sense, which is why i told you to sell when i went on "the today show" on october 6th of 2008.
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>> what is your advice today? >> okay, whatever money you may need for the next five years, please take it out of the stock market right now. >> oh, doctor. buying actually hurts you stocks kept falling, you never got to own the merchandise you bought on the dip at a higher price. that is the only time, just once in over 30 years, look i know this rule and the exception. october of 2008 i was cite sized for what i said on "the today show" and tell people to sell. i was chided for yelling fire in a crowded theater. my response was succinct, if the treater is burning you need to get people out, even if you know others won't make it. in 2008 and 2008 only, panic was the right move. the theater was on fire. the market headed down huge, flm a straight line. it was smart to sell even when we were already several hundred points down. because basically the market kept falling. getting back in was tough.
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but you managed to side step at the decline of 35% if you took action when i told you to get out now. of course it was better to heed my september of 2008 call, you dodged 45% climb, that was done in a less dire moment. every other time, every other crash or sell-off you could afford to wait or you should have bought in the panic. should have bought in the panic. on the day of a vicious sell off hold your horses. if you want to sell you will likely be able to get a better chance at higher prices. likely, okay? you have to be patient. even as i recognize it doesn't come easy when the market is getting eviscerated. panic selling is not a strategy. it's called empirical, i saw it work once, i'm betting that won't happen again. no matter how many things are going wrong, no matter how much it looks like the end of the world as we know it, dumping stocks in the teeth of a sell off is the wrong move. even in an awful market, there are genuine up days you can sell. believe me i have seen what
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happens when you proclaim sell sell sell, when you proclaim that it's time to panic. >> sell sell sell. >> and you get it wrong. when long term capital was collapsing in october of 1998, i wrote a column, "get out now" advising people to sell in an downturn because the fed didn't n understand the gravity of the moment. within an hour the fed held an hour to cut rates. the market rallied back in my face. a terrible moment for my hedge fund, magnified by the article, a moment i wrote about cautionary exercise in the perils of panicking, embarrassing to talk about it. i want to you do better than me. 1998 i was dead wrong. the other side of the panic you made fortunes. i reversed my stance not long after that the same day but it was too late. i had to pay up gigantically for the same stocks i sold in the
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morning. the bottom line, do not sell in the midst of a decline no matter how much you might want to that is bad timing. keep your head because you will get a better moment to sell, and n all my years of trading panic has been the right response to huge sell off once. every other time the right move was to buy in the weakness, keep that in mind the next time we get a horrible pull-back. lets go to paul in new hampshire. >>. >> caller: booyah from new hampshi hampshire. i just finished reading your book "getting back to even" i want to thank you for capturing the sentiment of the home investors in 2008. >> thank you. >> caller: i found the concept of a whisper number to be frustrating, what i would like to know why does it exist, who is doing the whispering and why don't the analysts say what the earnings are expected to be? >> look, first of all a great question. that is a great question because
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it's common sense, if they know that xyz corp will earn 10 cents, why they do use 9? they don't want the company to report in-line number because it will go down. they say 9 cents and then they hope for 10 cents. but that is the whisper number. sometimes if you get the whisper number you sell any way. they should cut it out. i'm in total agreement, with you paul. they want to create an upside surprise. nord in washington. >> caller: i have a question about figuring out the peg, which eps growth figure do i use and what about the negative figure touches verizon or cisco. >> peg, i like to use normalized earnings power, if you have a loss, smooth it out and see what
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it has done in the past. or use analyst numbers, go to yahoo! they have the estimates, use the estimates to figure out the peg rate. use the future numbers they are better because we invest in what will happen in the future not the past. bob in minnesota. >> caller: yeah, booyah, my question is on a yield you have to be in on the x date in order to get a yield, if you miss that date, how long do you wait until you know that next yield comes up? >> it's a quarterly, depends, some are monthly, some are quarterlies, don't fret. here what is you need to do. take a long term view you'll get dividends, go to the annual report, the most succinct depiction of power of compound if you reinvest. time after time i tell you not to panic, start selling down, you won't get a profit, you won't get a profit that way.
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you can have the best stock picks in the world and it won't mean a thing for your portfolio if you don't have a good sense of timing. i'm a big believer in the notion ordinary people, non-professionals can manage their money as well as the pros or better that is why i come out here every night to coach and teach you. in spite of what you may have heard in the intelligensia, it's possible to beat the market and outperform the benchmarks like the s&p 500 as long as you know what you're doing as long as you think like a disciplined
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investor rather than a gambler. a huge part of knowing what you're doing is having decent timing, or at least knowing enough not to make boneheaded mistakes about timing and when to buy and sell. that is why tonight i'm going over the frequent errors investors made, the ones i've made to steer you on the right track. it's easy not to make mistakes when everything is going your way. when the market turns south, when everything looks like it's falling apart, that is when people tend to screw up. let's say your portfolio gets caught with the pants down, you own too much stock, you have too much exposure. i have been there. what a nightmare, so horrible. the worst part is not knowing what to do. not know whether you should blow out of the stocks or hold tight. i explained why it's almost always the wrong move, what else is dangerous in a super ugly market, propensity to take sweeping drastic action.
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when it seems like everything is going wrong, when the economy and market are getting worse, when you're certain nothing good can happen. take a breath, hold it and don't do anything crazy. what is crazy? i'll tell you what is crazy. what is crazy is selling everything. >> sell sell sell sell sell sell sell sell sell sell. >> even if you own too much stock you want to lighten up in the midst of a bearish moment, you have to resist to sell everything that is bad timing. never buy or sell all at once, it's pure arrogance to assume you can time your trades that well. my rule buy and sell by increments. if the stock goes down, buy a little more at a lower price. if it goes higher after you sold some, you can sell more to take advantage of the higher price rather than feeling like a chum p. that rule applies to more than just individual stocks, can apply to your whole portfolio. no matter how it looks don't sell everything all at once. what is the right move then? here is the crisis play book for
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dealing with awful moments in the market. moments where the fundamentals are deteriorating and you feel like it's the last train out of the bad station. first, you can't sell everything but you have to sell something. not everything you own is equally good and some might be pretty darned bad. here is my rubik for what can be sold. big profits in stocks, don't give them back. that is a cardinal sin as i say in all my books. you have to ring the register. you have something with fundamentals have changed, the story going against you? blow it out. something that you think is going lower, even just short term? >> sell sell sell. >> some of it, just do it, that's fine get your head clear, can buy it back lower when the risk is in your favor. do not sell it all. that is just plain stupid. don't ever blow out of everything, don't give up on stocks entirely that you like and hide in treasury bonds or certificates of deposit.
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when things look dour put your capital in stocks that are selling off even though they don't deserve to. buy that money to buy something you like. this is why not in the heat of battle but the calm in the end of the week, i rate my stocks in my charitable trust from one to four. we send out a bulletin friday. the ones being the best, the four's time to get rid of. the names to buy buy more of, right in the moments of pure chaos, you have decided they are ones, i like them. the four's are expendables, stocks you wish were higher, they can be sacrificed. don't wait for them to get back to even if you can own something else that is likely to go up more over the same period of time. why not just sell it all when it seems like the market is turning against you? why not? american stores, don't know it? don't remember it?
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american stores is the old acme where my mom was friendly with the checkered. i owned american stores through the 1990s, betting they were so much more and the time would be on my side. then one day we had a brutal sell off i couldn't stand the pain. i was so at this address it was driving me crazy. >> house of pain. >> i got goldman sachs to buy my book, they took me out of my poxpo positions. you can offer every stock you had and they would buy the on the line. i was running 400 million at the time. i'll tell you. >> that was easy. >> included i sold to goldman was american stores. sell ugly i didn't want to own anything. two weeks later, after i sold all my positions, albertson's bought american stores. big premium, huge would have made my year. i couldn't believe it. held on american stores all
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these years like a chump i sold it. if i added to the position rather than blow it out, they were doing just fine i could have made my year. i always remember that moment because it caused me to rehow i felt about blowing out my whole portfolio when stocks are going lower. it took me down 2%. stock market bottomed down 2% i didn't have the guts to go back in at the time. i was going down 4, 5, 6, 8, 10%. what is the moral? what did i do wrong? selling something wasn't a bad idea, the pain sometimes does become too unbearable when you're all in, meaning you have little to no cash on the sidelines. selling everything was a massive mistake. always good to use a top notch s and p 500 sell off to pick at, not load up, but pick at your ones, like i do for action alerts, your favorite stocks after the sell-off ends and they always end at some time. not oall the stocks will bottom
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at the same time. the best ones will get put on sale with the other merchandise, good with the bad. with wheat, chaff. but selling everything, getting out all at one time doesn't leave room for the possibility that things can get better, doesn't leave room for the next american stores. just takes you out of some of best stocks out there in addition to the bad ones, awful timing. here is the bottom line. not every big decline is the end of the world. never trade like it's the apocalypse, never sell everything at once. go to the supermarket of stocks, find what you want to buy, and always remember, i checked out on the most important stock i liked, in my zeal to get in that ten items or less line. and because of my haste, my bearishness, i missed huge american stores buy out along with a stock market rally that followed after i left the store. please, please, do not repeat my mistake. after the break i'll try to save you more money. >> let's go to kentucky.
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>> reporter: hillbilly booyah. >> a big las vegas ching ching booyah. >> staten island hey now, forget about it booyah. >> michigan. california, georgia, alaska. >> booyahs come from all across america. let cramer let you channel yours.
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you can not time your moves correctly unless you know what to own. that is what i'm always telling to you do the homework one hour per week per stock if you can. only by being familiar can you know when it makes sense to buy or sell their stocks. i accept you might not be able to keep up like that. if that is the case you could be good go if you follow this show and check in with the stocks on a regular basis. knowing what you own is more important than ever now. we live in a world where the media never met a disaster it didn't like. there is a negative story, a bare case, you could absolutely bet that the press will go in total hurricane mode, day after
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day after day. the more sensationistic, the better. this is simply a fact of investing life, the media takes a political, weather issue, crime and punishment, they fan the flames of panic. >> ahh! >> portraying them as huge catastrophes, like apocalypse now. every story will be exaggerated. we have to accept overreaction is part of the sea of change, in the way the business media and market work. sea of of change that can shake you out of anything you own or might want to buy. at times you seem to be unable to steer ourselves effectively against the media's glue machine, unable to think
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opportunist opportunistically. how many times have we seen this happen? think about it the market has sold off. >> sell sell sell. >> based on instability, civil war in libya, tragic earthquake and tsunami in japan, prompted a full nuclear crisis and sovereign debt crisis in europe. what should you do during the scares? what is the right way to react to this kind of crisis? we are very far away from any solution in europe. the crisis moments make terrific buying opportunities, if it's in the right stocks. not all stocks, some are not a buying opportunity. how? let's figure this out the "mad money" way using the method i would employ at my hedge fund that events occurred that drove down all stocks because they overwhelm the market. we have to put the event in perspective. we have to ask ourselves, the news is potentially tragic, dangerous, terrifying. what effect does it have on the earnings per share? the numbers?
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let me give you an example. in the 20 years that i invested other people's money, there were a slew of events that hit the stock market. i used what i called the bristol myers theory, named after the company i always felt had the most consistent earnings imaginable. here is how it would play out. at the hedge fund we used to have morning meetings at 6:00 a.m. i felt if you came in at 6: 01, what was the point, go home since so much of the opportunity to make money had passed which is why i dismissed you. i sent you home if you were a minute late. they were lucky. i didn't throw water bottles or electric appliances. all right, i did it once. i saved that for when people lost you money, every time you get a nasty events the morning meeting one would say, what are we going to do, this nuclear power plant in cher noble melted down. what do we do? i would scream back dripping in sarcasm and arrogance, what the
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heck does that have to do with the earnings of bristol myers. i made a list of the equivalents of bristol myers. the companies that wouldn't be hurt even if it turned out to be worse than i expected, giving the 24 hour news cycle blows everything out of proportion, we get new crisis every week you have to develop your own list of bristol myers list. maybe verizon, steady eddie. southern company, be ready to buy them when we get a market-wide sell off. based on exaggerated crisis that won't hurt. then step two, ask yourself is this event bad for all the earnings out there? when the egyptians were demonstrating in the early 2011, trying to kick out the dictator, a moment even the oil stocks, which benefitted from high
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prices, got knocked down along with everything else. curious, right? what a tremendous. >> buy buy buy. >> if you bought the oil down. you made a killing. so remember, when there is a big scary crisis in the globe that threatens to knock down the market like the sovereign debt crisis in europe, remember the bristol myers theory, ask what the heck has to do with the earnings of my stock before you do selling. put it in perspective, you might feel like -- >> buy buy buy. >> there will never be a shortage of terrifying events that will bring down the market especially after being amplified by the media. next time it happens, don't run away there might be an opportunity for you to make a big profit. randall in california. >> caller: hi, jim. frequently i heard you make reference to buying deep in the option. >> right. >> caller: i'm trying to get a
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definition, when you say, go deep in the money. >> i have 100 page description. it means what is called a stock replacement theory, okay? you have a $600 stock, a lot of money, go buy a $550 call, will be less money, that way you're cut off from the down side, that call is 40 bucks, say a $40 premium, it could work, that is the one i described in the book. the book is about stock replacement, not having the big risk of the common stock. ted in florida. >> caller: how are you doing, zbl jim. thanks for ktaking my call. >> no problem. >>. >> caller: if i had a port toll yo of $100,000 and wanted to invest in precious metals, what percent age is the portion to invest and would you go gold or silver and you go silver would you go smaller commodities rather than larger bouillon?
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>> take silver off the equation. >> sell sell sell. >> i say this at twitter, it's a junk metal. junk. we'll buy gold, buy up to 20%, we do not buy it once, we buy on the way down if it doesn't come down if you put on 20 or 30% of the position, we missed it. you want 20% gold and use the gld and that does fine as a proxy, not the gold stocks, they don't work. next terrifying event shakes you out i promise there will be more, take a deep breath, make a list and do buying. stay with cramer. zap technology.
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welcome back to my timing is everything show on "mad money" i'm teaching you timing your buys and sells can and should done. those who say it's impossible, they want to keep you in the collective chains.
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consider me a bolt cutter setting you free. i want to talk to you now about a particular kind of chain you need to be unshackled from. called the ipo chain. first, i like ipos. we do our best to analyze them for you all the time on "mad money" but they are not easy to do. so often you call me and say jim will xyz ipo be a good one? to which i have to say how the heck do i know? it depends where they bring the deal, the price of the offering and the shares of the offers. 50 million shares when h the deal is done, if the backers talk about the deal at 20. values the company at one billion dollars. $20 price times 50 million shares. but the bankers can do a lot of different thing, a lot more variables than you realize. first, they don't offer all the stock there is. insiders own boat loads, venture capitalists own a lot. whoever seeded the company.
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secondly the $20 ipo price may just be what is called the price talk. meaning what the initial price they are thinking of not the last price, the way the deal comes at. if demand accelerates, the price will move up from 20 to 25, 25 to 30, that values the company at a more rich level. think about it i might like the ipo at 20, not at 30. that is not different if i like a stock trading at 20 and a sale at 30 because it has gotten expensive. a third varable, the bankers if they want the stock to pop, generate a hot deal, one that goes to a premium from where it opened after it opens, premium from where it's priced after it opens, they can hold back stock. this is crucial, ladies and gentlemen. so let's say again xyz is 50 million shares outstanding. the bankers after canvassing buyers road shows, talking to clients, getting indications of interest, might sense that while the company has 50 million
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shares, there is only demand on the ipo for 10 million shares to be sold if it's priced at $20 per share. they issue 50 million shares, the stock might wallow, but the opposite is true, too, if they cut back the number of shares offered. the bankers are experienced. the syndicate managers as they are known, can figure out thousand make a pop by cutting back the number of shares they offer. all done give and take with the issuer. but let's say the bankers say hmm, we have demand for 10 million shares at $20, that is oversubscribed, that is the parlance, they may not be hot enough for a real hot deal, though, so maybe instead of offering 10 million shares, they cut it back to 5 million shares. one-tenth of the shares outstanding, half of the demand out there. that cut back, they believe would generate real excitement when people get their allocation where the number of shares they are given versus the numbers they asked for. that is what makes for a hot
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deal. because if the bankers have demand for 10 million shares and issue 5 million shares, everyone who wants in will be cut back who wants the stock. the deal will be wildly oversubscribed and al locations well below what you were hoping for. that is how hot deals are made because you have to scramble and buy the rest of it in the after market. that drives it up. i call these offerings sliver offerings. the bankers chose to make the deal hot. perhaps to warn customers or create excitement. if they offered more stock on the deal there would be a risk the price wouldn't hold and nothing is worst than a broken deal, one that goes below the offering price. it hurts shareholders who bought, and it hurts the company. better to offer a sliver get people excited, known as the lock-up expires, hopefully the stock will be well above where the ipo is priced and will get a big profit. i don't care about the insiders,
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i care about you. i want you in on these deals. any deal where new company offers less than 10% of the company on the ipo is one i want you in on, even if i don't like the company. take groupon, the social media company i'm not a fan of the company in general and this one in particular i'm not sure they have staying power, i know they have done great things for retailers, i am tired of my daily offering i get in the morning i don't want to go ten miles out of may way to save money on tooth whitening session, pizza or brazilian waxing, whatever that is. but group, on the ipo, let me in. there are 640 million shares of grpn, the bankers offered 40 million shares. that sliver of an offering almost assured demand would exceed 20. it opened at 28, went to 30. company received valuation, the buyers made out like bandits if you got in at 20. how about the buyers in the
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after market, the price of the stock when it starts trading. when you bought at 28 you didn't have room for error. they began a long ugly slog down, trading as low as 15, didn't hold the print price, half of the high before it bounced back. what was the right thing to doing something follow steve miller's edict, take the money and run. get stock and ring the register when it opens, not buy more and not hold on. while the brokers don't encourage flipping, which is putting in for hot deal and banging out when the stock is trading, i'm not your broker, they may not condone the practice, i say why not? i'm working for you. you do commission business, you do fee business, you nut fput i a deal that is designed to pop why can't you take advantage of the pop? sometimes only two decisions to be made. nut for sliver deal and sell it in the pot. you time that sell to the open of the hot deal you don't stick
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around for one red hot minute longer and never never never buy in the after market. vast majority of the time buying in the after market on slived deal is for suckers. be smart, take the money and run. run.
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not every stock can be owned forever. there are very few stocks that you should own all the time year after year, decade after decade. the fact is, if you don't know what would make you sell a stock, then it's not okay for to you buy that stock. lots of people end up selling at the wrong time because they never anticipated selling at all. they thought why they wanted to buy. they didn't have an exit strategy. as your investing coach i need to you make sure you don't make that mistake. how do you time yourselves? there are many stocks where when
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you buy them you need to understand some day possibly some day soon, you will have to -- >> sell sell sell. >> tech stocks, not safe to own them unless you recognize they can't be owned forever. you will need to ring the register to take your profits when you have them before they slip away. same for smoke stack industrial companies that only make money when the economy is healthy, cyclical stocks, you have to sell them eight ways to sunday at the first signs of a slow down. a lot of this comes down to understanding what you own and being willing to change your mind. a tech stock like skywork solutions is not pepsico. sandisk is not general mills. the first half of these pairs, tech names, skyworks, micron that can fly and crash. >> ahh!
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>> second half, they are staples, they plod along step by step, inch by inch. you have to take the money off the table because if you let it ride, that vehicle will eventually crash, dropping 10, 20, 30% or more in days or hours. >> all aboard! >> a staple can be owned long term, that doesn't mean nothing will go wrong, price of tobacco could go high, but very unlikely it will fall off the cliff. when it comes to trading vehicles you have to change your mind, be ready to sell, tech stocks that are winners when a cycle is strong, pcs tablet computers are losing when the cycle is weak. a stock like skywork solutions makes components founds in mobile devices, smart phones,
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can make you money when times are good. you better believe it can get annialiated when business isn't hot. there is no cheerio cycle or hershey bar cycle. no more heinz ket cheup in the fall than the spring. the tech stocks, if you bought up in the last two months of the rally and sold it when you had to, you made money. perhaps a lot of money. back then you had to buy the part and equipment makers, dot coms, in the and expansive were buying demand. if you did buy between 1998 and january say of 2000 you made money than the last ten years. you have to change your view when the facts change. i don't want you to end up like victims of dot com bomb.
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selling something even though you bought it at a higher price, because the facts have changed and the business has gotten weaker. often the stocks will get hammer at the first signs things are deteriorating. don't tell yourself it's too late to sell, it's not. they can go much, much lower than you believe. your first loss is your best loss like i tell you in "real money" discipline makes a big difference. i'm tireless saying not to be greedy, play with the house's money. i tell you it doesn't matter where a stock has been, only where it's going. you don't want to own a high flying tech stock because it's going down, down, down. when that happens, sell the darn thing, you can buy it back later and lower when business is improving, not deteriorating. bottom line, don't treat risky trading vehicles as though they
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are staples that can be owned for ages. handle them with care, handle them with caution and you can do very well for yourself. take profits on the way up and get out on the way down. we don't have to call the top to make money in the names. you just have to be willing to jump ship when it's clear the stock has peaked and ready to head down. for the count. let's take a call from dale in iowa, dale? >> caller: hawkeye booyah to you, jim. >> done your way with the hawkeyes. >> caller: i'm a retired investor, learned the hard way things you're trying to tell the listeners. my advice is listen to cramer and read his books. >> thank you, buddy. >> caller: i have two questions. >> sure. >> caller: i'm using preferred stocks as income. how much of my portfolio do you think should be in preferred stock at my age and how do you evaluate preferred stock as to
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their ratings? >> this is a great question, because i have been trying to figure out the worth of different bank preferred, where you get good profits, and i am nervous, because i don't like to have my income being from the situations where i'm reaching for income and that is a lot of the preferred in the banking business. away from the banking business it's good. i wouldn't put -- it's an issue. i wouldn't put more than 20% of your money in one issuer and i wouldn't put 20% in preferred. frankly there is not enough good preferred to get that much in. be careful of the prefers, particularly the bank prefers. selling for a profit does not make you a sell-out makes you a mart investor. timing is everything. choosing the right time to buy and sell is the only way to make profits forever. profits forever. leave that to the diamonds, m"md money" is back after the break.
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. if you made a list of countries from around the world... ...with the best math scores. ...the united states would be on that list. in 25th place. let's raise academic standards across the nation. let's get back to the head of the class. let's solve this.
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yeah, scott. i was just about to use... that's a bunch of ground-up paper, lad! scotts ez seed absorbs and holds water better. it's guaranteed to grow grass anywhere, even if you miss a day of watering. [ scott ] seed your lawn. seed it!
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catch up with mad mail. here is one from brian. dear jim i'm relatively new to trading stocks, why the chart of eur usd seems to move in lock step with the chart of the spy? this is the important question of the whole era, they get the etf that measure the strength of the euro versus the dollar. the hur oh is the universal crisis, goes around the world and creates havoc.
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if we knew that the euro is busting apart, the brilliant hope to make one world in europe is falling apart every man for himself. if you see the euro going down there is no money to bail out any of the count rise and banks you can expect we will have a great recession in europe. really important the euro if they phase it out, ultimately be stable for some time until we get through the crisis. this one from karen in indianapolis. professor kraimer thanks for your brilliant insight and guidance i think it's telling you have no peer after the years you have been doing mad money. how does seeing a high level of short interest affect your view of a stock. could you give a general step by step, doesn't the stock have to rally if the short is covered. i have made it my business to not, not make that decision. i like to look to see if there is a lot of short selling, the only reason i do that, i respect
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short sellers, they have been wrong as much as right. this perception they are smart money. what is smart is a big argument against the stock or chicanerry at the stock. i have seen stocks that have been great places to buy not to bust the shorts but they have been wrong, that happens quite frequently. let's discount it as a tool in our arsenal. one from brandon, hi mr. cramer as a 24-year-old professional who was fortunate to get a full-time nobody in my major 3 months after graduating and bought a home on my own i feel it would be good time to get in the stock market. i know there is a notion about having a diverse portfolio, how many stocks would you recommend owning to create a diverse portfolio. brandon, you have to put away money for index fund, first 10,000 in index fund, after that you can picking stocks, i don't want you to have -- honestly, if you have $2500 you can start
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buying $500 in five positions, that is the only way to do it. first put the money in the index fund, we need ultimate divers y diversificati diversification, with mad money, we do investing. the teacher that comes to mind for me is my high school math teacher, dr. gilmore. i mean he could teach. he was there for us, even if we needed him in college. you could call him, you had his phone number. he was just focused on making sure we were gonna be successful. he would never give up on any of us.
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